Viacom CEO says fight with Redstones has slowed the company’s Paramount Pictures sale
Viacom Chief Executive Philippe Dauman said the planned sale of a 49% stake in Paramount Pictures has hit a speed bump because of the battle with the company’s controlling shareholder, Sumner Redstone, but that Viacom is pushing forward with its pursuit of a strategic investor for the Melrose Avenue movie studio.
“Naturally, recent events have slowed down the process,” Dauman told investors at the Gabelli & Co. annual movie and media conference on Thursday morning. Viacom had planned to unveil its selected partner by the end of June, but that goal “has slipped,” Dauman said.
The Paramount sale has become a divisive issue, particularly with the Redstone family, and could prove to be the undoing of Dauman, who has run Viacom for nearly a decade. The company, he said, was motivated to “unlock” value for Paramount Pictures, which has been suffering at the box office, by bringing in a deep-pocketed investor who would own nearly half of the studio.
Some investors on Wall Street have been encouraged by the plan, figuring it would boost Viacom’s depressed stock price. The company’s shares have fallen more than 45% in the last two years.
However, the ailing, 93-year-old Redstone has made it clear that he does not want Viacom to part with any piece of the storied studio, which the media mogul acquired for $10 billion following a hard-fought battle against Barry Diller in 1994. Recent court documents show that Redstone has become tearful when the topic of a Paramount sale is mentioned, including during recent visits with a geriatric psychiatrist.
The planned sale motivated Redstone on May 20 to remove Dauman and another Viacom board member, George Abrams, from the board of National Amusements Inc., the Redstone family investment vehicle that owns the controlling voting shares of Viacom and CBS. Dauman and Abrams then filed a lawsuit to try to block their ouster from that board, as well as the trust that eventually will oversee Redstone’s stock holdings.
On Thursday, Dauman, for the first time, discussed the shape of the proposed Paramount transaction.
Viacom, he said, would keep a majority stake in the studio, and that the auction had attracted more than 40 potential suitors. The company had been in discussions with a few of those potential partners until Redstone lowered the boom in late May.
Dauman declined to specify any of the potential investors, citing a desire for the talks to remain confidential. Some analysts have speculated that Viacom has been in discussions with prominent Chinese firms, who could help Viacom get more of its programming, including its TV shows, into the huge China market.
Dauman emphsized there would be significant upside for all Viacom investors, including the Redstone family, “if we can carry this forward.” He said the deal would unlock at least $10 a share for investors, and that having a global partner could carry other benefits for Viacom and its portfolio of cable TV channels.
“We are continuing to explore the potential for unlocking value with select partners,” Dauman told investors at the conference. “We are going to proceed deliberately, thoughtfully and thoroughly with our board as we perfect and move forward with a transaction that will only be presented if it has the kind of value that I am talking about.”
He didn’t try to sugar-coat Paramount’s recent struggles at the box office. Last weekend’s release of “Teenage Mutant Ninja Turtles Out of the Shadows” did not achieve hoped-for results, though it was far from a disaster.
“Paramount has had a tough year, that’s no secret,” Dauman said. “We have been working to ensure that Paramount going forward … will have a vibrant pipeline.”
Dauman said the studio is going to release 15 films a year, and have franchises that appeal to global audiences. “We are going to have a ‘Transformers’ film every year for the next three years and we know how well ‘Transformers’ plays around the world, including fast-growing territories such as China,” he said.
Dauman didn’t delve into the legal problems with the Redstone family in connection with the court case that opened earlier this week in Canton, Mass. He did note that the episode has been difficult, mentioning his 30-year association with Redstone, a partnership that dates back the mogul’s hostile takeover of Viacom in 1987, when the 62-year-old Dauman was a young attorney.
“It’s a lot more fun creating the content rather than being the content,” Dauman said, prompting chuckles from investors in the audience. Noting the turbulence at the top of the company, he added a note of thanks to Viacom’s employees.
“We continue to be very focused on the business,” he said.
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UPDATES:
10 a.m.: This article has been updated with additional details and background information.
This article was originally published at 9:16 a.m.
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